How the result is calculated
Lenders want to know what share of your income is already promised to someone else. The answer looks like one fraction, but the countries here measure it against two different kinds of rule, assess income on two different bases, and disagree about what counts as comfortable. This guide sets out the mechanics they share and then the differences, with the United States as the worked example.
Housing ratiohousing costs ÷ income
Total ratiodebt payments ÷ income
Maximum borrowingannual income × multiple
- housing costs
- mortgage or rent plus the tax, insurance and building charge a lender counts with it
- income
- gross or net monthly income, whichever basis the country assesses; the form says which
- debt payments
- housing costs plus car payments, student loans, card minimums and other debts
- multiple
- the loan-to-income cap, in countries that use one instead of a ratio
For the rule that actually binds anywhere other than the United States, open that country's own page from the country list on the calculator.
Worked example
| Item | Amount | How it is obtained |
|---|---|---|
| Gross monthly income | $8,000.00 | Gross monthly income |
| Housing | $2,000.00 | Mortgage or rent, with no tax or insurance entered |
| Car payments | $400.00 | Car payments |
| Student loans | $250.00 | Student loans |
| Credit card minimums | $150.00 | Credit card minimums |
| All debt payments | $2,800.00 | 2,000 + 400 + 250 + 150 |
| Housing ratio | 25% | 2,000 ÷ 8,000, against the 28% conventional guideline |
| Total ratio | 35% | 2,800 ÷ 8,000, against 36% conventional, 43% FHA and qualified mortgage |
At 36% the most debt this income supports is 8,000 × 36% = $2,880, so there is $80 of headroom.
| Country | Figure | How it is obtained |
|---|---|---|
| Canada, GDS limit | 39% | the same 25% housing ratio passes comfortably |
| Canada, TDS limit | 44% | maximum debt 8,000 × 44% = $3,520, so $720 of headroom |
| Ireland, first-time buyer | $384,000 | 4 × annual income of $96,000: no ratio to pass at all |
| Ireland, second and later buyers | $336,000 | 3.5 × 96,000; the existing debts affect the lender's affordability check but not the cap |
Reading the result
The headline is the total ratio, read against the bands for the country you picked rather than a universal scale. The housing ratio sits beside it, and where the country caps a multiple instead, the maximum-borrowing figure replaces the verdict. Each limit is labelled either as a published rule, with the regulator that set it, or as a market convention, because a number nobody published should not look like one that was.
Entering income monthly or annually also sets how the breakdown reads. The ratios are always measured on a month's figures, which is how a lender assesses them; the breakdown table shows each line monthly and annually side by side, and the annual column is simply twelve of each line.
What changes the result
Not every country uses a ratio
There are two families of rule, and they answer different questions. Ratio countries cap the share of income that goes to debt:
| Country | Housing | Total | Basis |
|---|---|---|---|
| United States | 28% (31% FHA) | 36% (43% FHA and QM) | gross |
| Canada | 39% (GDS) | 44% (TDS) | gross |
| Netherlands | 22% to 28% by income | same | gross |
| France | none set | 35%, insurance included | net |
| Finland | none set | 60% stressed | net |
Multiple countries cap the loan itself and ignore the ratio:
| Country | Limit | Who sets it |
|---|---|---|
| Ireland | 4× income (3.5× if you have owned before) | Central Bank of Ireland |
| New Zealand | 6× for owner-occupiers, 7× for investors | Reserve Bank |
| United Kingdom | 4.5×, as a limit on the lender's book | Financial Policy Committee |
Which family you are in changes what you should be doing about it. In a ratio country the payment is the thing measured, so clearing one moves the answer immediately. In a multiple country the ceiling comes from income alone, and your other debts bite only through the lender's affordability check inside it.
Gross or net makes a third of the difference
Half the countries here assess income before tax and half after, and the two are not interchangeable. The United States, Canada, Britain, Ireland, New Zealand, Australia, the Netherlands and Japan write their rules against gross pay; France, Germany, Spain, Finland, Sweden, India and Sri Lanka against net. The form asks for whichever basis the country uses and says so, and the calculator does not convert between them, because that would need the take-home pay calculator's whole tax engine. Enter the wrong one and a comfortable 30% arrives as an alarming 45%, or the reverse.
What "good" means moves with the country
There is no universal safe ratio, so the bands on the calculator move with the country rather than staying on the American 36 and 43. In the United States the traditional guideline puts 28% of gross income on housing and 36% on all debt, and the FHA and qualified-mortgage limits stretch the total to 43%. In practice American automated underwriting will approve conventional loans at 50% of gross with compensating factors, which is why the 36 is better read as a comfort level than a cut-off.
A ratio is also only one input. Credit history, employment, the deposit and the property all matter, and several countries stress-test you at an interest rate well above the one you are offered rather than at the payment you would make. Those tests usually bind before the ratio does, so clearing it is a necessary condition, not an approval.
Statutory rules and market conventions
Some of these limits are published by a regulator: the Central Bank of Ireland's multiples, the French HCSF's 35%, CMHC's 39 and 44. Others are simply what lenders do where no rule exists, as in Germany, Spain, India, Sri Lanka and Japan. A statutory limit is a wall the lender cannot write past except inside a published allowance. A convention is a habit: a bank may sit either side of it, and it can move without anything being repealed. Even the American 28/36 is a convention; only the FHA ratios and the 43% qualified-mortgage benchmark are written down.
How to improve the ratio
Either side of the fraction moves it, but not equally. Ratio rules measure the payment, not the balance: a $6,000 car loan at $400 a month costs more ratio than a $12,000 card debt at a $150 minimum, so pay the car off first even though the card is the bigger number. Raising documented income works too, though lenders usually want a history before they count variable earnings; anything you cannot evidence does not exist as far as the ratio is concerned. And do not open new credit while an application is live: a new car payment lands in the ratio immediately, while the asset it bought counts for nothing.
What is not included
- The lender's affordability test. Stress rates, credit history, the deposit and the property are assessed separately, and usually bind before the ratio does.
- Conversion between gross and net. Enter income on the basis the form asks for; the calculator does not translate one into the other.
- Living costs. Groceries, childcare, utilities and transport are not debts, so they are not in the ratio, but they are in a lender's affordability model and in your own budget.
- Regional or product-specific rules. Lender overlays, government-backed schemes and investor rules vary within a country and are not modelled.
Using the result
Treat the total ratio as your borrowing thermostat, read against your own country's bands rather than a number you saw on an American site. Where the country caps a multiple instead, the maximum-borrowing figure is the one to plan around, and your existing debts still reduce what a lender offers inside that cap. Either way, run the payment through the budget that includes groceries before you commit.